Starbucks: Staying local while going global through market research

Starbucks: Staying local while going global through marketing research

Summary Starbucks

Corporation,

doing

business

as Starbucks

Coffee,

is

an

American

global coffee company and coffeehouse chain based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world, with 23,187 stores in 64 countries. Starbucks has gone from a small local coffee start-up in the 1970s to the largest coffeehouse company in the world. It has revitalized the coffee industry in last two decades. The key factor behind this success of this company was the passion about the coffeehouse experience. As of august 2007, Starbuck, the largest coffeehouse in the world had 6,566 company operated and 3,729 licensed stores in the united states, and had 1,613 company-operated stores and 2488 joint venture and licensed stores outside the united states. The CEO of Starbucks Howard Schultz first realized the importance to become passionate about the coffeehouse experience along with the company‟s passion about coffee. He saw in Italy that in the espresso bars .the employees of those coffeehouses were able to connect with their customers because they know their customers personally. Customers were coming to those coffee shops and were making connections with other people. The key four strategic pillars for expressing the Starbucks brand are, 

The coffee, which is the main source of its credibility to the consumers



Some of the finest products that are associated with the coffee experience



The warm, welcoming, and inspiring environment: and



Community involvement.

Starbucks offers a lot of products to its customers. Such as customized CD music collection, sandwiches, gums and chocolates are offered to the customers. In many stores it also offer wireless internet access. Starbuck gets its lucrative product offering ideas through extensive marketing research. A lot of products and services are direct result of suggestions from patrons or local employees. Starbuck keeps a strong connection with its customers, and maintains a local charm and feel in its stores. The connection with its customers helps the company to gather more information about new markets. The local connection with customers and the consequent brand building have allowed Starbuck to expand its business in other areas. Starbucks has been very much successful in achieving its objectives. In past few years, It has been aggressively expanding its business in newer markets. The different growth behavior of Starbucks in different countries is attributable to its different stages of development in the United States and different parts of the 1|Page

Starbucks: Staying local while going global through marketing research world. In international market, it is at the brand development and establishment stage. Starbuck maintains a local feel in its stores while expanding its business in different countries by stressing its culture and placing focus on its employees and customers through marketing research.

The Current market situation The current international situation for Starbucks seems to be part of their business and the reorganization of an emerging proved by become so his goal of becoming a world leader in a difference in people's lives makes the whole world. This is achieved very close to as evidenced by Starbucks in international current markets and the success of these companies. Countries where Starbucks is the current are: Australia, Bahrain, Canada, Hong Kong, Israel, Japan, Kuwait, Lebanon, Malaysia, New Zealand, Oman, People's Republic of China, Philippines, Qatar, Saudi Arabia, Singapore, South Korea, Switzerland, Taiwan, Thailand, UAE, Egypt, Britain and the United States distributed. However, net revenue roce 3 percent to $ 2.5 billion for the quarter the fourth 2011 compared to $ 2.4 billion in the fourth quarter 2007th quarter of Close 28 13week period September 2011 reports, Starbucks recorded a net profit of $ 5.4 million to $ 105.1million in restructuring charges and other processing costs of the strategy included. Net income was $ 158.5 million for the same period a year announced in July 2011, to close at approximately 600 stores in the U.S. and 61 operated stores companies in Australia, and reduce by about 1000 and opened in filled positions leadership structure and non-store organization.

SWOT Analysis Strengths: 

Starbucks is No. 1 specialty coffee retailer of - in terms of market share and market capitalization. (1997, £4596.6 million and sales growth 20.9%)



It is a global organization with 16,000 coffee shops in 15 countries world-wide.



Strong brand image associated with high quality coffee and excellent customer service “The Starbucks Experience”.

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Extensive store network, 8,500 shops are owned by Starbucks directly. The company franchises and licenses 6,500 shops. It has developed excellent skills in franchise management. 2|Page

Starbucks: Staying local while going global through marketing research 

Due to its specialism in all things coffee - it achieves high buying volumes - scale economies and utilizes international sourcing, some from fair trade suppliers.



Committed workforce, one of Fortune Top 100 Companies to Work for.

Weaknesses: 

Starbucks is a premium brand commanding premium prices. As competitive pressures increase, the company could be undercut by lower price rivals such as McDonalds or Costa Coffee.



Starbucks is seen as an “American Global”, possible perception that big American chains are trampling on national cultures, “Starbucks was trampling on Chinese culture”.



Over-dependency on coffee and coffee related products.



US based company, focus on the US domestic market.



Reputation with pressure groups. Criticized for not using more Free trade products.

Opportunities: 

Significant opportunities exist, especially outside domestic US market for joint ventures. Starbucks could overcome planning restrictions, reduce costs through co-locating at supermarket chains, pubs & restaurants.



Product range diversification into greater food ranges and non-food items. The company has experimented with warm sandwich lines, and I-tunes (music link). Also, sold music CD‟s and linked with clubs (e.g. book clubs) etc.



Licensing its name (e.g. ambient coffee through supermarkets) could provide new streams of revenue.



Through CRM and database marketing it could target its high net worth customers and build greater loyalty with customer base. The introduction of loyalty schemes such as Starbucks Card, free re-fills and technology (free downloads of music) provide a competitive edge to its value proposition.



Continued focus on improving efficiency and effectiveness in the organisation, from procurement, to supply chain to customer service delivery.



Become more of a socially responsible brand. Better public relations activity, introducing more fair trade products, better distribution of profits to farmers and ethical sourcing practices

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Starbucks: Staying local while going global through marketing research

Threats: 

Possible saturation in the coffee, café market. In the US, 600 underperforming companyowned stores were closed. Consolidation on the high street, growing competition from national brands and new entrants, aggressive marketing (price wars, promotions), putting pressure on profit margins. Companies seek cost savings and new way to differentiate to retain customers.



Several activist groups maintain websites criticizing the company‟s fair-trade policies, labour relations, and environmental impact.



Recession or downturn in the economy affects consumer spending, with less disposable income to spend. Consumers defect to lower price venues and competitors.



Raw material cost rising - Starbucks is exposed to rises in the cost of coffee, labour and dairy products, and adverse changes in exchange rates.

Answers of Case Study Q1) Use the Internet to identify secondary sources of information pertaining to coffee consumption in the United States. Coffee Consumption in U.S., Association Survey Shows that About 83 percent of adults drink coffee in the U.S., the world‟s largest consumer of the beverage, up from 78 percent a year earlier, according to the National Coffee Association‟s 2013 survey. The New York-based group said today in a statement that 63 percent of adults drink coffee every day, compared with 65 percent a year earlier and 58 percent in 2011. The data was compiled from an online survey of 2,840 respondents from mid- January to mid-February. Among respondents 18 to 24 years old, daily consumption fell to 41 percent from 50 percent. The total for those 25 to 39 years old dropped to 59 percent from 63 percent. The association released the survey results in San Francisco at its annual conference.

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Starbucks: Staying local while going global through marketing research About 13 percent of the U.S. population used the single-cup format, up from 4 percent two years earlier. Among those 60 years and older, daily consumption rose to 76 percent from 71 percent, and the total for 40 to 59 years old climbed to 69 percent from 65 percent. Daily consumption of gourmet-coffee beverages “remained strong and steady” at 31 percent of the population, while use of traditional brands fell to 49 percent from 56 percent.

American Coffee Consumption Trends In 1999 there were 108,000,000 coffee consumers in the United States expenses an approximated 9.2 billion dollars in the retail sector and 8.7 billion dollars in the foodservice sector every year (SCAA 1999 Market Report). It can be inferred, therefore, that coffee drinkers spend on average $164.71 per year on coffee. The National Coffee Association found in 2000 that 54% of the adult population of the United States drinks coffee daily (NCA Coffee Drinking Trends Survey, 2000). They also reported that 18.12% of the coffee drinkers in the United States drink gourmet coffee beverages daily (NCA). In addition to the 54% who drink coffee everyday, 25% of Americans drink coffee occasionally (NCA).

American Coffee Consumption Data The average coffee consumption per capita in the United States is around 4.4 Kg. Among coffee drinkers (i.e. not per capita) the average coffee consumption in the United States is 3.1 cups of coffee per day (NCA). Per capita men drink approximately 1.9 cups per day, whereas women drink an average of 1.4 cups of coffee a day (NCA).

Q2) What are consumers looking for in a coffeehouse experience? How do they view the starbuck’s coffeehouse experience? How can Starbucks determine answers to these questions? Coffee consumers are increasingly aware of specialty coffee. Designing a coffee house isn‟t just about getting the right look or serving the best coffee. It‟s about creating an experience which not only shouts about the amazingness of your coffee and how that makes people feel good, but also an experience which gives a double-shot boost to brand. There are some other factors customers are looking for in a coffeehouse experiences.

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Starbucks: Staying local while going global through marketing research Quality coffee: the first and foremost reason to visit a coffee house is to taste the excellent quality coffee and refreshing. This is the core feature of a coffee house and the first expectation of customers‟ from a coffee house. Location: The main reason why people visit a coffee shop is the location. The location you choose for your coffee shop needs to be easy to access by car and by foot. Shopping malls and retail parks usually guarantee footfall which is very important. A coffee shop that is on the wrong side of the train station will have significant less business. Connection with people: people come to the coffee house not only for taking quality coffee but also for daily connection with other people. People come to their convenient coffee house to take coffee while spend time and maintain a relationship with others.

Cleanliness: Customers like to sit down at a clean table. Dirty tables upon arrival are a big mistake. Coffee shops should be nit and clean. First impressions are very important and customers study coffee shop whilst waiting in the queue. The displays, coffee machines, fruit machines and counter should all be clean. At all times! Friendly staff: A visit to a coffee shop is a treat. Friendly staff in coffee shops is usually the ones that are enjoying their jobs. No matter how developed our customers‟ palates, knowledge and vocabulary of tasting, or experience with fine coffee, retailers should be cognizant of meeting customers on their terms. Friendliness should not be faked; it should come from the heart. Atmosphere of Coffee shop: A good atmosphere is the result of the right music, friendly staff, the correct temperature, warm colors, cleanliness and many more.

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Starbucks: Staying local while going global through marketing research Wi-Fi internet access for coffee shops: Offering your customers Wi-Fi internet access in your coffee shop is a great extra service. It gives your customers an extra reason to visit your coffee shop.

Customers experience in Starbucks

After identifying the customers‟ needs from coffee houses, Starbucks included lots of facilities so that customers view the Starbucks coffeehouse experience very positively. They also view this experience as enjoyable. They view Starbuck as a friend who has respect for the customers local culture and who provides exactly the things customers‟ needs. Some of the things that the customers get in the Starbucks coffeehouses are, 

Warm and welcoming environment makes them to feel good and makes the company a part of community.



Some of the finest product that is associated with their coffee experience. Customer takes this change positively.



The company makes themselves a part of the community and consumers are like to be a part of that.



The people were interested in ice-star bucks and blended star bucks & Starbucks gave them this flavors‟.



Wireless & Internet access also make a positive impact for Starbucks.

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Starbucks: Staying local while going global through marketing research So customers view the Starbucks coffeehouse experience very positively. Many of the products and services are direct result of suggestions from the patrons. The Starbucks coffeehouse experience also provides a feeling of social bonding. Because customers come into the stores and they meet new people. Besides this, the employees also welcome the customers very gently. So customers view the in store experience as a development of social relations where the employees know the customers personally.

Steps to determine the answers Starbuck can take several steps to determine answers to these questions. Such as, it can, 

Can conduct marketing research



Develop questionnaires asking specific questions about customers‟ needs, requirements, and expectations.



Can take suggestions from its local employees in different regions, countries.



Can collect syndicated information from syndicated research firms about the general expectations of customers from every kind of coffee shops.

Q3) A Survey is to be conducted to determine the image coffee drinkers have of Starbucks & other coffee chains. Which survey method should be used & why? Which method should be used and why for determining the image coffee drinkers have of Starbucks and other coffee chains are given below. At the beginning we need to explain what survey method is. A survey Method is a structured questionnaire given to a sample of a population & designed to elicit specific information from respondents. Respondents are asked a variety of questions regarding their behavior, intentions, attitudes, awareness, motivations & lifestyle characteristics. This question can be asked verbally, in writing, or via computer. Typically it‟s a structured questionnaire. Classification of survey method: 1. Telephone Interviewing: Telephone interviews can be 2 typesa) Traditional: It involves phoning a sample of respondents & asking them a series of questions. 8|Page

Starbucks: Staying local while going global through marketing research b) Computer Assisted: It uses a computerized questionnaire administrated to respondents over the telephone. 2. Personal Interviewing: It can be in 3 ways. They Area) In Home: respondents are interviewed face to face in their homes. b) Mall Intercept: Here respondents are intercepted while they are shopping in malls. c) Computer Assisted: The respondent‟s sits in front of a computer & answers a questionnaire on the computer screen by using the keyboard or mouse or touch screen. 3. Mail Methods: It‟s the 3rd major form of survey methods. Can be conducted by 2 waysa) Mail Interviews: In a traditional Mail interview questionnaires are mailed to preselected potential respondents. The respondents complete & return the questionnaire. There is no verbal or written communication between researcher & the respondents. b) Mail Panels: A large & nationally representative sample of households who have agreed to periodically participate in mail questionnaires. 4. Electronic Interviewing: This method can be conducted by 2 waysa) E- Mail Interviews: A list of e-mail addresses is obtained. Respondents type the answers & send it back through e-mail by using internet. b) Internet Interviews: Here respondents are asked to go to a particular web location to complete the survey. The survey is posted on that specific web-site.

Reason for selection of survey Methods I think the Personal interviewing method should be used. Because

This method is useful to obtain detailed information about personal feelings, perceptions and opinions



It allows more detailed questions to be asked

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It usually achieve a high response rate

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Respondents' own words are recorded



interviewees are not influenced by others in the group



one-to-one situation

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Starbucks: Staying local while going global through marketing research In Starbucks situation the coffee drinkers can be asked directly to determine the image of the coffee drinkers of Starbucks or other coffee house. It can be in home, mall intercept or can be computer assisted. There can be a series of question & we can get their response by using Likert scale. Though it is a little bit costly & time consuming method but the mentioned advantages are the cause for choosing this method.

Q4) Starbucks is thinking of introducing a new gourmet coffee with a strong aroma. Can the observation method be used to determine the consumer reaction to this coffee prior to national introduction? If so, which observation method should be used? Starbucks coffee shop should use personal observation method prior to national introduction. A skilled viewer records the reactions of those customers who order and drink the new coffee brand. Consumers as humans react to extra attention or to the presence of another person, and therefore, behave differently in a social group than they do alone. So they will react differently on national introduction. Moreover, the observation exercise needs to be disguised so that people don‟t know what is being studied and don‟t adapt their responses, reacting as they would under normal conditions, on being presented the coffee. Personal observation would best suit the purpose if it was done unremarkable and all the reactions recorded unaltered by the observers to determine the „real‟ reaction. That is why Starbucks should used personal observation method before national introduction.

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